U.S. authorities are investigating whether middlemen in the $5 trillion-a-day foreign exchange market posted fake bids, rigged auctions and gave confidential information to others who then profited from it, according to people familiar with the situation.

The investigation, by the U.S. Commodity Futures Trading Commission and New York’s Attorney General, is focused on the currency options desks at several interdealer brokers, staking out new territory after U.S. officials prosecuted banks for colluding to manipulate foreign-exchange rates.

The investigation began more than a year ago when New York Attorney General Eric Schneiderman subpoenaed several brokers over concerns they were skewing markets by fabricating bids and offers to rustle up business in quiet periods and less widely traded currencies. Since then, the CFTC has begun working with Schneiderman’s office and the scope of the investigation has significantly broadened, said the people, who spoke on condition of anonymity because the investigation is continuing.

"ICAP only has an economic interest in this venture of 23 percent and no management control," said Neil Bennett, a spokesman for the London-based company. Lausanne, Switzerland-based Tradition declined to comment.

BGC and London-based Tullett also declined to comment.

Steve Adamske, a CFTC spokesman, and Eric Soufer, a spokesman for the New York Attorney General’s office, declined to comment.

Broker Interviews

The CFTC has interviewed brokers in the U.S. and secured the cooperation of individuals, one of the people said. Some of the firms are also carrying out their own internal probes and have disciplined employees, the person added.

Authorities around the world have been clamping down on the comparatively lightly regulated currency markets since 2013 after allegations that bank traders colluded to rig foreign-exchange rates. So far, more than a half-dozen lenders have been fined a total of more than $10 billion and scores of traders have been dismissed in a scandal that has led to a reassessment of how currency is bought and sold by companies, investors and individuals.

Outside of foreign exchange, interdealer brokers have been caught up in investigations into the manipulation of interest rates and derivatives. ICAP and another British broker, RP Martin, were fined a combined $90 million in 2013 and 2014 for helping their clients rig the London interbank offered rate. ICAP’s New Jersey office is at the center of an ongoing probe into the rigging of ISDAfix, a benchmark used in swaps markets.

The primary focus of the current interdealer probe is currency options, which give investors the right but not the obligation to buy or sell at a specified level. While much business in the $300 billion-a-day market has migrated onto electronic exchanges in recent years, a sizable portion of transactions are still brokered over the telephone by so-called voice brokers, who are paid a small commission on every deal. It is this section of the market that has attracted authorities’ notice, according to the people.

‘Flying’ Bids

Beyond brokers fabricating so-called “flying” bids and offers -- the fictitious efforts to create a market out of thin air, particularly during quiet spells -- investigators are also examining whether individuals disseminated market-moving information to favored clients and whether some attempted to influence or rig auctions, one of the people said, without elaborating on which auctions or how.

It’s unclear when the investigation will conclude or what sanctions, if any, firms and individuals may face, the people said.

Whatever the outcome, the timing is bad. Interdealer brokers have been struggling to reinvent themselves amid a shift across financial markets toward electronic trading and lower commissions. To survive, the industry is shrinking and consolidating. ICAP agreed last year to sell its voice broking arm to rival Tullett Prebon for about 1.1 billion pounds, although the deal hasn’t yet closed. In January, BGC completed its purchase of rival GFI.